I've been meaning to do more research on this...but I get lazy.
I did an analysis a few seasons back though in Knight D3. Of the top 50 players in the world (by overall rating, which technically means phooey but still, players 700+ in D3 tend to be pretty good), 8 were D3 recruits confirmed (I know this because they were sim-recruited kids fully recruited by Sim AI (i.e. they weren't recruited by a human who left after RS1, giving simmy credit for a D1/D2 signing). Of the top 20, 2 were D3 recruits. In most instances, they were kids who grew 250-300+ points in their careers.
These kids are literal diamonds in the rough...there are very few of them each cycle. But there are gems at the D3 level who can develop into low-tier D1 caliber talent. Most D3 coaches choose to search D1 and D2 because there's a greater volume of good talent not because good talent is completely absent in the D3 pool. Also, D3 kids are often high risk high reward as hughes points out - because when you find a kid who is all green at D3 if his ratings are low enough, you're at the whim of his WE and your ability to play him - plus how green those greens really are.